We entered March not fully comprehending the magnitude and global economic ( and soon to be political) shock of the Covid – 19 Pandemic.
With carrying a position into March our moderate February drawdown of -0.77% should have realised into a small but quick profit for early March. However as you can see it pulled us into significant drawdown of -9.52% on the 9th March when the market closed.
I entered into recovery mode which began to take effect after our ultimate zones had been established and the market slowly began to seek equilibrium. Institutions desperately trying to find balance and slashing interest rates across the board made for volatility never seen before. Part of my strategy encompasses intraday trading if conditions meet my requirements, which they certainly did during the last 2 weeks of the month. This helped contribute about 50% to the overall recovery and profits added to the month.
April is currently positioned well and I will be trading predominately EUR crosses but will be scaling back on some opportunities. This will probably reduce the April return but will provide a cushion to build on the March performance.
I will update the investor account in a later post to demonstrate how Darwinex pay performance fees and also what the plan looks like for April in more detail.
The chaos unleashed last week in the markets have hopefully found a base level. The institutional levels have been reset and hopefully I can plot to trade these uncharted expansion zones.
It was a difficult period to trade through, my plan does require self discipline but this helped me navigate through the anticipated drawdown of almost 8% on my Darwin WET. The biggest challenge was a EURCAD position which pulled me into the wrong side of the market with an unbelievable depreciation of the Canadian Dollar in a rapid amount of time. Ditto with the EURUSD taking out all of 2019 positions and some. Just staggering to witness.
Whilst these positions can cause short term concern it is important to acknowledge the importance of these equity swings in my plan. They provide further opportunities and confirmation of new alpha zones for me to trade into. So in summary the EURCAD trade ended up being very profitable after the peak drawdown.
I plan to continue to trade intraday on GBPUSD and add further long term positions in EURUSD, possibly EURAUD/GBPCAD next week with an eye on early April profits. These position trades may see the monthly return drop before month end depending on how fast the market moves next week. Or we could end up higher, I really cannot say but just trade what I see.
So it isn’t just the Hares that go mad in March… I don’t need to write an essay on Corona virus as we all know about the crisis each and everyone of us is living through, so onto trading…
I had positions both sides of Euro at the beginning of the month, the buy side cycled very quickly with volatility reaching record levels. Obviously fuelled by central government easing the currency on the run up to an expected rate cut to -0.5% and pricing this into the market way ahead to combat the inevitable sell off, massive volumes of carry trades were likely liquidated fuelled by the race of G7 nations to cut interest first.
My first cycle of sells is likely to conclude hopefully this week and I am very comfortable with my second cycle of positions to be held until the end of the month. If they come in sooner then great but I’m hoping to add more next week if price presents itself to my levels.
The anticipated drawdown due to this move has been managed comfortably.
The development of the crude oil price war did catch me out on a CAD trade, I have an initial position that I expect to hold now for a few weeks (unless we get more surprises from the US/Canada to defend their positions). Again, this is a first cycle trade so I have plenty of capacity to add into the position when the opportunities arise and it could build into a very healthy trade.
This month is about managing margin and trading the plan. I can take reassurance that during these wild market conditions and managing live trades directly involved in these volatile moves reaffirms that my current market approach is sound. Witnessing EUR taking out all of 2019 in a matter of days was a humbling experience and one I am grateful for to keep me grounded. Many traders have bitten the dust.
What a month this has been for trading… Corona virus has seemingly played havoc with all markets and the EURO has reacted with volatility at first plummeting and right on the last day of the month seemingly supported by the major institutions. A clear sign that the market makers does not know what to do!
We had hedged positions in EUR earlier in the month and caught the big swings both ways.
Rather than sit on an indicated 3% profit for my Darwin WET for the month I traded on Friday entering positions knowing we would be pulled back into drawdown for month end.
Seeing value and opportunity is more important to my trading than looking good at month end.
We had a high water mark at 3% for the month and continued to scale into positions that are likely to crystallise in March.
The underlying performance has been solid for me this month returning 7.5% on closed trades which is above my target. The strategy is proving to be robust in times of excess volatility and the money management being key to future success.
Yes, we enter March with drawdown but I’m confidently placed to capitalise on the next EUR move. I’m really looking forward to some strong trades in March.
DEMO Investment Fund is performing steadily, I would like to see a move up from the current positioning. Let’s see what the market gives us: